The plaintiff claimed against the defendant for injunctive relief in respect of the defendant's conduct as an insurance broker and its assertion to be independent and neutral.(1)
The defendant was licensed as an insurance broker in accordance with Section 34d(1) of the Industrial Code (GewO). Its shares were held 100% by X- Life Insurance, which the defendant referred to in its promotional material. Among other things, the defendant advertised using the statement "Independence and neutrality - we are committed to our customers and represent exclusively their interests".
The plaintiff, also an insurance broker, took the view that the defendant should not act as an insurance broker. In view of its position as a wholly owned subsidiary of X- Life Insurance, the plaintiff argued that there was a conflict of interest and that the defendant's claim to be independent and neutral was misleading.
In the first instance, the Passau Regional Court granted the claim for an injunction.
In the second instance, the defendant's appeal was successful in so far as it challenged the prohibition on acting as an insurance broker issued by the Passau Regional Court. However, with respect to advertising, the defendant's appeal was unsuccessful.
The Munich Higher Regional Court dismissed in the second instance the argument regarding the plaintiff's claim that it was misleading for the defendant to act as an insurance broker because an insurer holds the majority of its shares.
The court stated that since it was undisputed that the defendant holds a licence to act as an insurance broker, its public image corresponds to the actual facts and is therefore true.
However, the court further assessed that the claim was not misleading in any other way. Even a legally permissible and therefore objectively correct statement could be misleading if it leads to a misconception in the mind of the targeted public, which is likely to influence its commercial behaviour. Under German law, a licence to be an insurance broker under Section 34d(1) of the GewO does not depend on whether and to what extent insurers have shares in a company. If a party wanted to make the admissibility of the presence of an insurance broker dependent on the fact that an insurer holds no more than 50% of shares, this would amount to a market access requirement that is not provided by the legislature and for which there is no legal basis. This also follows from the fact that, under Section 15(1)(1)(11) of the Insurance Mediation Ordinance (Versicherungsvermittler-Verordnung (VersVermV)), insurance intermediaries must inform the policyholder of holdings of insurance undertakings of more than 10%. Therefore, the legislature assumes that insurers may hold shares in insurance brokerage companies, and nevertheless sees no need to limit the amount. Further, the court emphasised the fact that Section 59(3)(2) of the Insurance Contract Act (VVG) provides that anyone who claims to be an insurance broker without being one is liable like a broker; therefore, the legislature would have seen the possibility that a pseudo-broker might in fact be guided by the interests of an insurer.
According to the court, advertising using the words "independent and neutral", on the other hand, would be misleading as it would likely mislead the targeted public about the participation structure. The addressed public would understand the attacked statement not only to the effect that the defendant acts independently of any shareholding, but that it actually is independent. However, this is not the case. There is a potential risk that the defendant will be guided not only by the interests of customers (policyholders) but also by those of its shareholders. Advertising by an insurance broker which misleads about its dependence would increase its attractiveness.
The verdict is rather surprising. According to German law, there is a strict separation between brokers and agents; German intermediaries must decide whether they wish to act as brokers on the side of policyholders or as agents as representatives on the side of insurers. They cannot act as both. Therefore, it is surprising that a brokerage firm is allowed to be 100% owned by an insurer as this might bear the risk of the broker being guided by the insurer. Interestingly, the Munich Higher Regional Court saw this conflict in respect of the ad, but not in respect of the activity as a broker. It could have been argued that the legislature has introduced a strict separation between brokers and agents and insurers (eg, in Section 59 of the VVG and Section 34d(1) of the GewO) and therefore has declared the activity of a brokerage company which is 100% owned by an insurer is not permissible. Further, in 2016 the Federal Supreme Court ruled (verdict of 14 January 2016, file I RZ 107/14) that the settlement of claims by a broker on behalf of an insurer is not permissible due to the potential conflict of interest. Here too, the strict separation of the interests of insurers and policyholders was emphasised.
There are at least convincing arguments that the insurer may at least not own a predominant share in the brokerage firm. However, the court has convincingly ruled that such a company's claim to be neutral and independent may be misleading.
Endnotes
(1) Decision of the Munich Higher Regional Court, 16 January 2020 - 29 U 1834/18.
